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Most founders assume banks care about profitability. They don’t.

Banks care about predictability, and they assess it using a financial language most entrepreneurs have never been taught. When you don’t understand that language, you unknowingly send signals that weaken trust, restrict lending, tighten covenants, and limit your options long before trouble appears on your P&L.

This is why profitable businesses fail.
This is why bankable businesses thrive.
And this is why your business must learn how banks think.

In this week’s edition:

• How banks actually make money (simple breakdown)

• What central banks monitor — and why it shapes your borrowing cost

• How interest rate cycles create expansion or contraction

• A real $150M refinancing that recovered $30M in declared losses

• A free 20-question Bankability Test

• A preview of my upcoming Bank Intelligence Suite

Let’s begin.

1. How Banks Actually Make Money

Most entrepreneurs only experience banks as lenders. But a bank is a business with its own balance sheet, income model, and risk engine.

Here’s the cleanest explanation of how a bank really earns profit.

The Simplified Bank Balance Sheet

Assets
• Customer Loans: $850M
• Government Bonds: $200M
• Interbank Lending & Reserves: $50M

Liabilities
• Customer Deposits: $900M
• Short-Term Borrowing: $150M

Equity
• Shareholders’ Equity: $50M

Now let’s look at how this becomes money.

1. Net Interest Margin (NIM)

This is the spread between borrowing (deposits) and lending (loans).
Banks pay 1–2% on deposits and earn 5–8% on loans.

On $850M in loans, even a 2% spread = $17M annual profit.

This is the core of banking.

2. Fee Income (30–40% of revenue)

Banks make huge revenue from:

• Arrangement fees

• Facility fees

• Overdraft fees

• FX fees

• Wealth management fees

• Transaction fees

If you’ve ever paid a loan arrangement fee, now you know why.

3. Treasury Operations

Banks stabilize their income by managing:

• Liquidity portfolios

• Government bonds

• Derivatives

• Interest rate swaps

This helps them profit even in weaker lending markets.

4. Capital Requirements (Basel III & IV)

Banks must hold capital in proportion to risk.
This is why they’re obsessed with your:

• Cash conversion cycle

• Working capital

• Customer concentration

• DSCR

• EBITDA quality

• Liquidity buffers

• Covenant behaviour

If you look unpredictable, you cost them capital.
If you look predictable, you generate profit.

That difference determines your loan rate, your approval speed, and your strategic options.

2. How Central Banks Influence Your Borrowing Cost

Central banks don’t adjust your individual loan rate.
They adjust the cost of money, which banks pass down to you through lending rates, facility pricing, and refinancing conditions.

What central banks actually watch:

• Inflation

• Unemployment

• Liquidity conditions

• Wage growth

• Consumer demand

• Credit availability

• Financial stability

When inflation rises → interest rates rise

To slow the economy and stabilise prices.

When unemployment rises → interest rates fall

To stimulate investment and hiring.

Right now — heading into 2026 — the signals are significant.

Key Global Indicators (2026 Outlook):

• Global inflation (G20): 3.8%

• US inflation: 3.1%

• UK inflation: 3.4%

• Eurozone inflation: 2.9%

• US unemployment: 4.1%

• UK unemployment: 4.3%

• FED funds rate: 4.25–4.50%

• ECB base rate: 3.75%

Inflation is cooling.
Unemployment is rising.

Historically, this combination marks the beginning of a refinancing window — a period where banks relax risk appetite, improve pricing, and compete for strong borrowers.

If you understand this cycle, you can refinance ahead of the market.
If you don’t, you refinance when credit is tight — and you pay for it.

Fail. Pivot. Scale : This is not a slogan. This is a cycle that we all encounter every day in our life.

The book will be released on 1st March 2026 and you can now pre-book for a 25% discount.

3. Expansion vs. Contraction — The Interest Rate Cycle

Banks behave very differently depending on the macro cycle.

Expansion Cycle Characteristics

• Yield curve steepens

• Credit spreads tighten

• Banks increase lending

• Refinancing becomes easier

• Covenants soften

• Working capital lines increase

This is when you negotiate from strength.

Contraction Cycle Characteristics

• Yield curve flattens or inverts

• Banks reduce lending

• Credit spreads widen

• Risk appetite collapses

• Covenants tighten

• Working capital lines shrink

This is when banks suddenly feel “nervous” — even if your numbers look fine.

Here’s the truth founders misunderstand:

You’re not negotiating with your bank.
You’re negotiating with the economic cycle.

If the cycle is in your favour, your options multiply.
If it isn’t, you are negotiating from weakness — even with strong financials.

4. Case Study: The $150M Refinancing That Recovered a $30M Loss

One of the most transformative CFO roles I’ve had involved a business generating:

• $3B in revenue

• $39M gross margin

• $30M in declared losses

• A working capital gap exceeding $200M

On paper: profitable.
In reality: suffocating.

Receivables weren’t converting.
Payables were stretched.
Liquidity was evaporating.
The business was technically unbankable.

Here’s how we reversed it.

Step 1: Restructured $150M across multiple bank lines

Revolver, term loans, asset-backed lending — turning fragmented debt into a structured portfolio.

Step 2: Converted volatile cashflows into predictable repayment

Banks do not fund potential.
Banks fund visibility.

Step 3: Cleaned receivables and rebuilt the working capital cycle

This directly improved the bank’s risk weighting.

Step 4: Introduced CFO-level liquidity discipline

13-week cashflow, DSCR, covenant dashboards — the tools banks trust most.

Step 5: Restored trust with credit committees

Credibility is a form of capital.
When banks trust you, they give you time — and time creates solvency.

Outcome

✔ $150M refinancing approved
✔ $30M declared losses recovered
✔ Liquidity stabilised
✔ Confidence restored across banks and board

This is why I always tell founders:

Your bank is a business.
Are you?

5. How Banks Read Your Business (vs. How You Read It)

Founders typically focus on:

Revenue • Gross margin • Growth • Profitability • Team • Opportunity

Banks focus on:

Liquidity • Cash cycle • EBITDA quality • DSCR
Payable discipline • Customer concentration • Inventory quality
Covenant behaviour • Predictability • Signalling

Founders talk about upside.
Banks manage downside.

Your success with banks depends on how well you understand the difference.

Your 20-Question Bankability Test — Free

This diagnostic tool reveals your bankability score (0–100) across four areas:

1. Liquidity Health

2. Working Capital Discipline

3. Debt Structure Quality

4. Bank Signalling & Credibility

Your score will show:

• How banks perceive your risk

• Whether refinancing is possible

• Whether you could secure new debt

• How prepared your business is for the next rate cycle

• What actions improve bankability immediately

👇 Click here to take the 20-question Bankability Test

Coming Soon: The Bank Intelligence Suite

A complete set of tools designed for founders who want to become truly bank-ready:

1. Book Series — “Your Bank Is a Business. Are You?”

Five volumes on bank psychology, risk, negotiation, and working capital.

2. Mini-Course — Working Capital Mastery

The exact playbook to turn receivables, payables, and inventory into a valuation engine.

3. 13-Week Cashflow CFO Toolkit

Templates, lender-ready dashboards, and cashflow systems used in multimillion refinancing.

4. Bank Negotiation Playbook

12 proven CFO moves that influence approval committees.

5. The Bankability Sprint (30-Day Accelerator)

Your guided path to being bank-ready for 2026.

Final Thought

Businesses do not fail because of profitability problems.
They fail because of liquidity problems.

When working capital dies → bankability dies → the business dies last.

If you learn to think like a bank, you will not just survive the next economic cycle —
you will use it to grow.

Until next week,
Matteo

Matteo Turi is a Chartered Accountant (ACCA), Board Director, and CFO with nearly three decades of experience across blue-chip corporations, startups, and scale-ups.

He is the author of Fail. Pivot. Scale: The High Valuation Code Revealed and creator of The Exponential Blueprint, a framework for valuation growth through IP monetisation, leadership succession, and international expansion. Read more at www.matteoturi.com or connect on LinkedIn